Question 1

Trust is similar to fairness and altruism - you only need to observe a single choice by a single individual in order to detect it.

Accepted Answer

A) True 
 B)False

Question 2

Describe the trust game.

Accepted Answer

There are two players: P1 and P2. Each p

Question 3

Sam wants to do something nice for his partner Alex. Sam buys Alex some chocolate covered peanuts. Unfortunately, Alex has a severe allergic reaction and must be rushed to the hospital. Luckily, Alex makes a speedy recovery. At first, Alex is furious with Sam, but then decides that "it's the thought that counts" and decides to do something nice for Sam and spends $\$ 100$ on a new pair of shoes for Sam.

Accepted Answer

A)  Alex's reaction can be considered reciprocating. 
B)  Alex's reaction can be considered fair. 
C)  Alex's reaction can be considered spiteful. 
D)  Alex's reaction can be considered trustworthy. 
A)  Alex's reaction can be considered reciprocating. 
B)  Alex's reaction can be considered fair. 
C)  Alex's reaction can be considered spiteful. 
D)  Alex's reaction can be considered trustworthy.

Question 4

Consider the trust game. How many subgames are in the trust game?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  0 
A)  1 
B)  2 
C)  3 
D)  0

Question 5

Sam wants to do something nice for his partner Alex. Sam buys Alex some chocolate covered peanuts. Unfortunately, Alex has a severe allergic reaction and must be rushed to the hospital. Luckily, Alex makes a speedy recovery. Alex is furious with Sam and refuses to speak to him for several weeks.

Accepted Answer

A)  Alex's reaction can be considered reciprocal. 
B)  Alex's reaction can be considered fair. 
C)  Alex's reaction can be considered altruistic. 
D)  Alex's reaction can be considered trustworthy. 
A)  Alex's reaction can be considered reciprocal. 
B)  Alex's reaction can be considered fair. 
C)  Alex's reaction can be considered altruistic. 
D)  Alex's reaction can be considered trustworthy.

Question 6

Sarah hires her friend Ben, who is studying accounting, to do and file her taxes. Ben and Sarah both know that if Ben does not put in full effort then it is highly likely that if Sarah gets audited they will find mistakes and Sarah will be punished. Because Ben's actions are hidden
from Sarah, but his actions also directly affect Sarah, this can be considered a situation of moral hazard.

Accepted Answer

A) True 
 B)False

Question 7

Offer a suggestion of how to reconcile these two findings: (1) increased levels of trust are associated with accelerated growth in GDP; and (2) On average, in trust games senders are likely to send the same amounts in South Africa as in the U.S.

Accepted Answer

The first finding relies on survey quest

Question 8

Consider Figure 16.3. Without "trust" the game would end at the first node with Player 1
playing T.

Accepted Answer

A) True 
 B)False

Question 9

Actions are to reciprocity as intentions are to fairness.

Accepted Answer

A) True 
 B)False

Question 10

Billy and Crystal want to do business together. Since this joint venture is highly risky for both parties, they hire a lawyer to draft and monitor a contract. The contract gives both Billy and Crystal assurance that the other will follow through on their promises. Identify the "transaction cost" in this arrangement.

Accepted Answer

the hiring of a lawyer represe

Trust is similar to fairness and altruism - you only need to observe a single choice by a single individual in order to detect it.

Describe the trust game.

Consider the trust game. How many subgames are in the trust game?

Sam wants to do something nice for his partner Alex. Sam buys Alex some chocolate covered peanuts. Unfortunately, Alex has a severe allergic reaction and must be rushed to the hospital. Luckily, Alex makes a speedy recovery. Alex is furious with Sam and refuses to speak to him for several weeks.

Offer a suggestion of how to reconcile these two findings: (1) increased levels of trust are associated with accelerated growth in GDP; and (2) On average, in trust games senders are likely to send the same amounts in South Africa as in the U.S.

Consider Figure 16.3. Without "trust" the game would end at the first node with Player 1 playing T.

Actions are to reciprocity as intentions are to fairness.

Rationality, Irrationality, and Rationalization

Transaction Utility and Consumer Pricing

Mental Accounting

Status Quo Bias and Default Options

The Winners Curse and Auction Behavior

Bracketing Decisions

Representativeness and Availability

Confirmation and Overconfidence

Decision Under Risk and Uncertainty

Prospect Theory and Decision Under Risk or Uncertainty

Disagreeing With Ourselves: Projection and Hindsight Biases

Naïve Procrastination

Committing and Uncommitting

Selfishness and Altruism

Fairness and Psychological Games

Filters

Exam 16: Trust and Reciprocity

Trust is similar to fairness and altruism - you only need to observe a single choice by a single individual in order to detect it.

Describe the trust game.

Consider the trust game. How many subgames are in the trust game?

Sam wants to do something nice for his partner Alex. Sam buys Alex some chocolate covered peanuts. Unfortunately, Alex has a severe allergic reaction and must be rushed to the hospital. Luckily, Alex makes a speedy recovery. Alex is furious with Sam and refuses to speak to him for several weeks.

Offer a suggestion of how to reconcile these two findings: (1) increased levels of trust are associated with accelerated growth in GDP; and (2) On average, in trust games senders are likely to send the same amounts in South Africa as in the U.S.

Consider Figure 16.3. Without "trust" the game would end at the first node with Player 1 playing T.

Actions are to reciprocity as intentions are to fairness.

Rationality, Irrationality, and Rationalization

Transaction Utility and Consumer Pricing

Mental Accounting

Status Quo Bias and Default Options

The Winners Curse and Auction Behavior

Bracketing Decisions

Representativeness and Availability

Confirmation and Overconfidence

Decision Under Risk and Uncertainty

Prospect Theory and Decision Under Risk or Uncertainty

Disagreeing With Ourselves: Projection and Hindsight Biases

Naïve Procrastination

Committing and Uncommitting

Selfishness and Altruism

Fairness and Psychological Games

Filters